US: MBA Mortgage Applications

Wed Dec 13 06:00:00 CST 2017

Actual Previous
Composite Index - W/W Change -2.3% 4.7%
Purchase Index - W/W Change -1.0% 2.0%
Refinance Index - W/W Change -3.0% 9.0%

Purchase applications for home mortgages fell by a seasonally adjusted 1 percent in the December 8 week, while applications for refinancing declined 3 percent. Unadjusted, the purchase index fell 6 percent in the week, putting it 10 percent above the level in the same week a year ago. The refinancing share of mortgage activity rose 0.8 percentage points to 52.4 percent, the highest level since January. Mortgage rates rose marginally in the week, with the average interest rate on 30-year fixed-rate conforming mortgages ($424,100 or less) up 1 basis point to 4.20 percent. The minor negative of the first weekly purchase applications decline in 6 weeks is more than offset by the 2.0 percentage point rise in the year-on-year gain to an impressive 10 percent, further evidence that home buyers are very active and confirming other reports of robust strength in the housing market during the fourth quarter.

The Mortgage Bankers' Association compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

This provides a gauge of not only the demand for housing, but economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the Mortgage Bankers Association purchase applications, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once a home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, housing construction has a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the MBA purchase applications index carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.